Vaibhav Jewellers IPO opens for subscription. Should you invest?

The initial public offer (IPO) of Vaibhav Jewellers opened for subscription on Friday, September 22 and will close on Tuesday, September 26.

Analysts are mixed on the IPO mainly due to the competitive nature of the industry in which the company operates.

"We advise investors to wait and watch the performance of the company once the stock is listed and then take a call," said Avinash Gorakshakar of Profitmart Securities while recommending an "Avoid" rating.

However, StoxBox said the company's product catalogue, stronghold in the southern markets and a good track record are some of the key positives driving the company's future prospects.

"The pricing looks attractive vis-à-vis its peers as it values MVGJL at 11.7x of its FY23 earnings. We, therefore, recommend a SUBSCRIBE rating to the issue," it said.

Vaibhav Jewellers is one of the earlier entrants in the organised jewellery retail market of Andhra Pradesh and continues to focus on regional expansion into the high-growth untapped regions within the micro-markets of Andhra Pradesh and Telangana.

About 77% of its retail showrooms are in tier-2 and tier-3 cities and the rest are in Hyderabad and Visakhapatnam catering to urban consumers.

The IPO comprises a fresh issue of Rs 210 crore and an offer for sale (OFS) of up to 28 lakh equity shares. The total offer size comes to about Rs 270 crore.

Under the OFS, promoter Grandhi Bharata Mallika Ratna Kumari will sell 28 lakh shares.

The company has fixed a price band of Rs 204-215 per share and investors can bid for a minimum of 69 shares in one lot and in multiples thereafter.

About 50% of the offer is set aside for qualified institutional buyers, 15% is reserved for non-institutional investors and 35% for retail investors.

For the three months ended June 2023, revenue from operations stood at Rs 508.9 crore and net profit was Rs 19.24 crore. In FY23, revenue rose nearly 20% year-on-year to Rs 2,027 crore, while profit jumped 61% to Rs 71.5 crore.

Net proceeds from the issue will be used towards capex costs for the proposed eight new showrooms, inventory cost of new showrooms and other general corporate purposes.

Bajaj Capital and Elara Capital (India) are the book-running lead managers and Bigshare Services is the registrar to the offer.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)